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Biofuels- Taxes; Climate; Farm Bill; Food Safety; and Ag Economy

Tax Issues: Political Background

John D. McKinnon and Janet Hook reported in today’s Wall Street Journal that, “Democrats are predicting that a much-debated tax agreement will clear a crucial hurdle comfortably in the Senate on Monday, with a margin that they hope will add momentum to the deal in the House.

“But even with President Barack Obama, former President Bill Clinton and a growing number of Senate Democrats backing the deal, House Democrats remained eager to test whether they could push Republicans to raise the proposed tax rate on estates.”

The Journal article stated that, “Democratic Rep. Chris Van Hollen of Maryland, a top adviser to House Speaker Nancy Pelosi, predicted Sunday that some sort of tax deal would pass in the House before the current session ends.”

Today’s article pointed out that, “In a separate interview on Fox News Sunday, Mr. Van Hollen said: ‘We’re not going to hold this thing up at the end of the day, but we do think that simple question should be put to test. We’re going to ask the Republicans and others, are they going to block this entire deal’ over the level of taxes on estates?”

With respect to specifics regarding the estate tax issue, today’s Journal article explained that, “Under the deal, the estate tax, which has been eliminated for 2010, would be reinstated next year at a top rate of 35% and applied to estates above $5 million. Without action, the rate is scheduled to spring to 55% next year and apply to estates above $1 million.

Many House Democrats argue the deal is too generous to inheritances. Some are arguing to amend the bill to include a top rate of 45%, applied to estates of $3.5 million or more. Another possibility under discussion is introducing and passing a separate bill on the 45% estate tax, then taking up the Senate measure, with its 35% rate, according to a House aide. That could give unhappy Democrats a chance to register their disapproval, without blocking action.”

Bridget Johnson, writing yesterday at The Hill Online, added that, “[Rep. Van Hollen] insisted that Senate Republicans, in striking the deal with the president, had not insisted on a provision of setting the tax of 35 percent on estates over $5 million as a ‘central portion of this deal.’ Many Democrats are furious about the rate and want a 45 percent levy on $3.5 million estates and greater.”

Dan Friedman reported yesterday at the National Journal Online that, “The Senate is voting on the deal Monday afternoon and is expected to pass the bill with most Democratic and nearly all GOP votes. Sen. Majority Whip Dick Durbin, D-Ill., predicted Sunday on CNN that only ‘a handful’ of Democrats will oppose the measure.

“That makes the House, where most Democrats in a nonbinding vote Thursday said they opposed the deal, as the key test. But chances Democrats will block the measure are low.

Senior White House political advisor David Axelrod, speaking on CNN, said the package will pass.”

Shailagh Murray reported in today’s Washington Post that, “The Senate is hoping to complete work on the tax bill on Tuesday, sending it to the House, where Democrats have proved less receptive to the Obama-GOP compromise.

For Democrats in both chambers, the most onerous provision in the package would exempt estates valued at up to $10 million from a newly imposed estate tax.”

Meanwhile, Jonathan Weisman reported on Friday at The Wall Street Journal Online that, “With his lurch to the political center dominating the week, President Barack Obama could have picked no one better to feature at the White House podium than the original practitioner of ‘triangulation,’ Bill Clinton.

“For more than a half hour Friday evening, the former president was back in his element—the White House briefing room—holding an impromptu press conference at Mr. Obama’s invitation. He answered the same questions Mr. Obama fielded earlier in the week, ardently defending the tax deal the current president struck with Republicans…”

And O. Kay Henderson reported on Friday at RadioIowa Online that, “U.S. Ag Secretary Tom Vilsack — the former Iowa governor — is among the Obama Administration officials who are urging Democrats in congress to embrace the compromise President Obama hammered out with Republicans.”

Friday’s update added that, “Vilsack also touts the provisions in the package which would extend tax breaks for corn-based ethanol and soybean-based biodiesel.”

Tax Issues: Biofuels

With respect to the biofuel provisions in the tax package, Daniel Looker reported on Friday at Agriculture Online (“How the stars aligned for ethanol”) that, “In spite of the coverage you’re seeing of angry liberals in the House and of Senator Bernie Sanders’ (I-VT) filibuster in the Senate, the Obama-congressional compromise on extending tax cuts is very likely to pass, and the new law is almost certain to continue the ethanol tax credit for another year at the current rate of 45 cents a gallon.

“This strong possibility wouldn’t even exist without several breaks for the industry, says an influential member of the House, a key Senate staffer and ethanol insiders.”

Mr. Looker pointed out that, “First, when President Barack Obama’s chief of staff, Rahm Emanuel left last October to run for Mayor of Chicago, he was replaced at the White House by Pete Rouse as interim chief. Rouse once headed the staff for former Democratic Senator Tom Daschle of South Dakota, and is said to be supportive of the ethanol industry.

“‘Pete deserves credit for this. Thank God we’ve got him over there,’ Representative Collin Peterson, a conservative Minnesota Democrat told Agriculture.com Friday. ‘Pete knows this stuff. He knows all the issues and the politics. We couldn’t have anybody better over there [at the White House].’

“The ethanol industry had many strong advocates in the Senate fighting to get the ethanol tax credit included in the bill, Peterson said. They included Democrats Tom Harkin of Iowa and Amy Klobuchar of Minnesota, Kent Conrad of North Dakota. But the key player may have been Republican Chuck Grassley of Iowa. This is his last month as the ranking Republican on the Senate Finance Committee, and the timing couldn’t have been better for the ethanol industry since Grassley has long been one of its strongest champions.”

Meanwhile, the AP reported on Friday that, “Minnesota Rep. Collin Peterson, a conservative Democrat who steps downs as chairman of the House Agriculture Committee in January, says he would have voted against the bill if it had contained some of the clean energy tax incentives and nothing for ethanol.

“‘I know this will help some members in the House, different parts of this will help different members,’ he said.

“Still, Peterson said the credits for the corn-based fuel probably won’t last forever. He said Rep. Jim Clyburn of South Carolina, the House’s No. 3 Democrat, told the caucus it was important to include ethanol in the bill, and some members booed him. That wouldn’t have happened a few years ago, Peterson said.”

Last week, Rep. Jeff Flake (R-AZ), “[S]ent a letter to Speaker Pelosi and Speaker-Elect Boehner urging them to prohibit the implementation of any further ethanol tax credits or tariffs which shield the ethanol industry from competition in future spending bills.

“The letter stresses that while federal subsidies to the ethanol industry have cost American taxpayers more than $6 billion in FY 2009 alone, the industry has failed to reduce our dependence on foreign oil and has dubious environmental benefits at best.”

Philip Brasher reported in Saturday’s Des Moines Register that, “The ethanol industry wanted a five-year extension of its subsidy. Producers will be happy to get to one more year, but they’ll have to fight again in 2011 to preserve government incentives for the biofuel.

Next year, the battle could be more difficult than it was this year, given the federal budget deficit and an influx of conservative Republicans opposed to government intervention in markets.”

Mr. Brasher added that, “What happens in 2011 is up in the air. A rival trade group to the Renewable Fuels Association, called Growth Energy, has proposed to phase out the tax credit and shift the money into financing ethanol pipelines and retrofitting service stations to sell gasoline with higher ethanol content. Growth Energy also wants to require automakers to equip cars and trucks to run on ethanol or gasoline….[G]rassley, who led the fight to preserve the subsidies during negotiations over the tax bill, said he would consider the infrastructure proposal next year.”

And The Wall Street Journal editorial board indicated today that, “The greater political risk here is for Republicans, who should worry that the tax bill is turning into a special interest spectacle. The bill revives a $1 a gallon biodiesel tax credit at a cost of nearly $2 billion, and there’s $202 million for ‘incentives for alternative fuel,’ $331 million for a 50% tax credit for maintaining railroad tracks, and so on. These credits are a form of special interest spending via the tax code, which is precisely the business as usual behavior that Republicans told tea party voters they wouldn’t engage in.

“These business subsidies are grease for Senate votes in favor of the deal, so the only chance to remove them would be the kind of public outcry that attacked the Cornhusker Kickback and other ObamaCare fiascoes. Call these ethanol favors the Hawkeye Handouts.”

Climate Issues (Cancun Concludes)

Darren Samuelsohn reported on Saturday at Politico that, “Negotiators from about 190 countries reached a modest set of agreements early Saturday in Cancun on how to tackle global warming but punted some of the most controversial questions for a later date.

“A year after U.N.-led talks all but collapsed in Copenhagen, delegates from countries large and small signed off on a package of low-hanging fruit that includes establishing a program to keep tropical rainforests standing, sharing low-carbon energy technologies and preparing a $100 billion fund to help the world’s most vulnerable cope with a changing climate.”

The article noted that the “Cancun Agreement,” “Fails to establish a firm date for negotiators to reach a conclusion on a new climate treaty;” and, “The Cancun Agreement, for example, puts off until next year’s meeting in Durban, South Africa, or 2012, the debate over whether to extend the 1997 Kyoto Protocol.”

Mr. Sameulsohn was a guest on C-SPAN’s “Washington Journal” program yesterday where he discussed developments from Cancun in greater detail, a portion of his remarks from yesterday can be heard here (MP3- 2:51).

John M. Broder reported in yesterday’s New York Times that, “The United Nations climate change conference began with modest aims and ended early Saturday with modest achievements. But while the measures adopted here may have scant near-term impact on the warming of the planet, the international process for dealing with the issue got a significant vote of confidence.

“The agreement fell well short of the broad changes scientists say are needed to avoid dangerous climate change in coming decades. But it lays the groundwork for stronger measures in the future, if nations are able to overcome the emotional arguments that have crippled climate change negotiations in recent years.”

The Times article added that, “The conference approved the package over the objections of Bolivia, which condemned the pact as too weak. Bolivia’s chief climate negotiator, Pablo Solón, said that the emissions reductions laid out in the plan would allow global temperatures to rise as much as 4 degrees Celsius over the next half century, twice the stated goal of the agreement and a level that would doom millions in the poorest and most vulnerable nations.”

Reuters writers Alister Doyle and Gerard Wynn reported on Saturday that, “The world’s governments agreed on Saturday to modest steps to combat climate change and to give more money to poor countries, but they put off until next year tough decisions on cutting greenhouse gas emissions.

The deal includes a Green Climate Fund that would give $100 billion a year in aid to poor nations by 2020, measures to protect tropical forests and ways to share clean energy technologies.”

Farm Bill

Ron Hays reported yesterday at the Oklahoma Farm Report Online that, “While [House Ag Committee Chairman Elect Frank Lucas (R-OK)] does not know the exact makeup of his committee as of yet- he told the wheat producers [on Saturday] that he was still trying to decide if there would be five or six subcommittees this coming year– he did indicate that there will be a learning curve for the almost 100 new members of Congress who will be sworn in the first week of January. Lucas says that he will use much of 2011 to educate those newer members of the House Ag Committee about the many different aspects of the 2008 Farm Law to prepare them to write in a bi-partisan way the 2012 farm bill early that year.

“The Congressman adds that he thinks that if Congress can lay a new farm bill on the desk of President Barrack Obama the summer of 2012- he will almost certainly sign up in the months leading up to his name being on the ballot that November.”

To listen to the remarks delivered by Rep. Lucas to the Oklahoma Wheat Growers Association on Saturday, just click here.

Meanwhile, the AP reported today that, “Legislation to provide more lunches and dinners to school children and make the meals healthier is expected to become law on Monday.

“President Barack Obama, accompanied by his wife, Michelle, is scheduled to sign the bill at a District of Columbia elementary school.

Food Safety

Lyndsey Layton reported in Saturday’s Washington Post that, “Public health officials closed the books this month on an outbreak of salmonella illness that had sickened more than 1,900 people since May and led to the largest recall of eggs in U.S. history.

“Two Iowa egg farms drew most of the blame, triggering a congressional investigation, a federal criminal probe and several lawsuits filed by victims.”

The article stated that, “What has not drawn much scrutiny is the role of the federal government, which recognized 20 years ago that salmonella in eggs posed a public health threat. Although federal inspectors have closely monitored meat and poultry production for the better part of a century, they have largely ignored eggs, another staple of the American diet. It was not until July, well after the recent outbreak was underway, that the government’s first rules on safe egg production took effect.

Unlike other regulatory efforts, this one did not sputter under lobbying pressure by business. In fact, the $4.4 billion egg industry had been seeking mandatory rules for years, despite the red tape and extra costs. Consumer groups wanted the regulation, and public health experts supported it, along with economists who said the benefits would far outweigh the costs.

But the proposal was thwarted by government itself – philosophical resistance to regulating business as well as rivalries and dysfunction at two federal agencies that share responsibility for keeping egg production safe.”

Ag Economy

The AP reported yesterday that, “Farmers across the South are contending with abnormally dry weather and a drought that began this spring. Crops in dry fields then baked during stretches of record-setting summer heat that scorched peanut fields, stressed cotton plants and stunted citrus fruit.

“The U.S. Department of Agriculture has declared disasters in parts of 16 states, with some of the driest spots in Texas, Louisiana, Arkansas, Alabama, Georgia and Florida.”

The article noted that, “‘Our farmers were digging peanuts this fall, and they’d pull up the plants and there would be no nuts in the shells,’ [horticulturist Chuck Browne, the extension coordinator in Lee County, Ala] said.

Keith Good